What changed
The all-in-cost ceiling for trade credits for imports, previously set under a September 2012 circular, was due for review. RBI has now decided to keep that ceiling unchanged and applicable until June 30, 2014, after which it will be reviewed again. No other aspects of the trade credit policy have been altered.
What it means for you
For banks and importers, this means the maximum interest rate and fees on trade credits remain at the same level as before. There is no immediate relief or tightening of borrowing costs for import financing. Banks should continue to ensure that all trade credit transactions comply with the existing cost ceiling and advise their customers accordingly.
What you must do
- Continue applying the existing all-in-cost ceiling for trade credits as per the September 2012 circular until June 30, 2014.
- Inform your constituents and customers about the extension of the current ceiling.
- Monitor any future RBI review after June 30, 2014, for potential changes.
Who it affects
Category-I Authorised Dealer Banks, Importers using trade credits, Corporate customers availing import financing
What is the all-in-cost ceiling for trade credits?
The all-in-cost ceiling is the maximum interest rate and fees that can be charged on trade credits for imports. This circular confirms that the existing ceiling remains in place until June 30, 2014.
Does this circular change any other trade credit rules?
No. All other aspects of the trade credit policy remain unchanged. Only the validity of the all-in-cost ceiling has been extended.
What should banks do with this circular?
Banks must bring the contents to the notice of their customers and ensure compliance with the existing cost ceiling until the next review.